đ„New Chapter 11 Bankruptcy - Nitro Fluids LLCđ„
OFS company brings some of that sweet ol' action back to SDTX.
On May 15, 2024, Nitro Fluids LLC (âNitroâ) and two affiliates (collectively, the âdebtorsâ) filed chapter 11 bankruptcy cases in the Southern District of Texas (Judge Lopez). The debtors provide a variety of oilfield services (âOFSâ) to exploration and production (âE&Pâ) companies in the Eagle Ford Shale and Permian Basin of Texas. The debtors, according to the first-day declaration of CRO Brad Walker, have suffered âseveral challengesâ in the months and years preceding the petition date. They seek to commence a marketing process âand consummate one or more value-maximizing transactions.â They are seeking approval of a $6mm DIP from Simmons Bank, their pre-petition lender.
What happened? Profound volatility in commodity prices. An adverse trial verdict. An event of default on a $36mm note that triggered various accelerations. All topped off by the fact that as businesses go, itâs harder to think of one more challenged in recent years than oilfield services.Â
Before proceeding, the org chart from Mr Walkerâs declaration may prove helpful. There are three debtors: Nitro Fluids (âFluidsâ), which organized in â10 and operates as a manager-managed LLC with three equity holders; Leasing, organized in â21 and which operates as a single member-managed LLC; and Straitline, organized in â17 and which operates as a single member-managed LLC.
Fluids provides fracking, drilling and well completions, primarily in the Eagle Ford Shale, and owns âsignificant assetsâ related to fracking. Leasing has no operations; it â...exists largely as a vehicle through which oilfield services frac assets have been leased to Straitline.â Its assets were acquired by funds contributed by Fluids. Straitline began as a provider of pump-down and well support services, but bought a frac fleet in 2020, when that part of the oil patch was showing signs of a rebound.
None of which is a good thing for the debtors â mostly because that rebound didnât really happen. Fluids owes $1.2 million under a credit facility with Spirit of Texas Bank (acquired by Simmons in 2021); that bank also made a $36mm loan to Fluids in 2020 under the pandemic-era Main Street Lending Program. The Boston Fed bought 95% of the note. Simmons serves as admin for the note, whose balance is now $36.95mm, and in its capacity as prepetition lender, is asserting a lien on substantially all assets of Fluids and Leasing, and certain assets of Straitline. Fluids also has $87k of vehicle debt; $1.93mm of liquidated unsecured trade debt; $12mm owed to non-debtor affiliates Nitro Construction and $15k to non-debtor affiliate Nitro Downhole (how anyone can say they work for that company with a straight face is beyond us). And lastly, a jury awarded Cameron International a verdict in the amount of $8.9mm in its lawsuit against Fluids, but a judgment has not been entered.
Straitline, for its part, has $150mm in cash. It owes the Small Business Administration $150k, secured by âsubstantially all of the assets of Straitlineâ and Blue Sky Bank $15mm. âThe Debtors believe that Blue Sky will assert that obligations owing under the Blue Sky Note are secured by liens in certain assets of Straitline.â Thereâs $14.5mm in liquidated unsecured trade debt.
Sounds like a lot doesnât it? Well, here is CRO Walker:Â
The Debtors have been unable to generate cash sufficient to service the substantial monthly interest payments required under the Prepetition Secured Facilities. Although Straitline is current under the Blue Sky Note and the SBA Note, Straitline has over $12.6 million in accounts payable on account of trade debt, and several of Straitlineâs creditors have threatened or commenced actions to collect on claims for past-due amounts owed by Straitline. At the same time, Fluids is behind on both interest payments due and on an approximately $5.56 million principal payment that was due in November 2023. On December 5, 2023, the Prepetition Fluids Lender sent a notice of default to Fluids for failure to make its principal payment in November 2023, but acknowledged receipt of an informal request for a deferral of the principal payment. On March 6, 2024, the Prepetition Fluids Lender sent a notice of default to Fluids, and on April 26, 2024, the Prepetition Fluids Lender delivered a letter accelerating and demanding immediate payment of the entire principal balance and all accrued but unpaid interest on the MSELF Note.Â
The debtors retained SP Securities in December â22 to explore a potential sale of all or a portion of Straitlineâs assets. Those discussions are continuing. Mr. Walker and Riverbend Special Situations Group were brought on board last October to explore alternatives for Fluids. The default notices put an end to any hope for an out of court transaction.
The proposed DIP from Simmons contemplates financing of up to $6mm, with a $1.5mm interim borrowing that will be used to repay employees, vendors and taxes. The debtors will also have use of cash collateral. The facility will also provide for the roll-up of some prepetition obligations.Â
âAlthough the DIP Facility has a 6-month term,â Walker concludes, âthe Debtors and their advisors believe that the Debtorsâ estates are likely to repay the DIP Facility and have additional cash infused into the Debtorsâ estates pursuant to a successful Marketing Process through one or more sales.â
Weâll see about that.
The debtors are represented by Bonds Ellis Eppich Schafer Jones LLP (Joshua Eppich, Eric Haitz, Ken Green) as legal counsel.
Company Professionals:
Legal: Bonds Ellis Eppich Schafer Jones LLP (Joshua Eppich, Eric Haitz, Ken Green)
Financial Advisor/CRO: Riverbend Special Situations Group (Brad Walker)
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest: